GCC sovereign wealth funds' assets under management grow to $4 trillion

That is almost the equivalent of Asia's, Latin America's and sub-Saharan Africa's put together, report says

Abu Dhabi Investment Authority building by the Corniche, Abu Dhabi. The National

GCC sovereign wealth funds’ assets under management have grown by 20 per cent on average in the past two years to reach about $4 trillion, driven by higher oil prices, according to a new report.

This is the equivalent of about 37 per cent of global SWF AUMs, data and research company S&P Global Market Intelligence said in a report on Tuesday.

Their size is almost the equivalent of the sum of all the AUMs of Asia, Latin America and sub-Saharan Africa's SWFs, the company said.

Among the world’s 10 largest investments on behalf of state-owned investors during 2022, five were from GCC sovereign investors, with the UAE accounting for 62 per cent of total capital deployed (through three funds, namely Abu Dhabi Investment Authority, Mubadala and ADQ), 28 per cent from Saudi Arabia and 10 per cent from Qatar, according to S&P Global Market Intelligence data.

“GCC sovereign wealth funds have largely benefitted from external surpluses generated by the latest energy revenue windfall across the region to increase their global footprint and deepen their foray into global markets through diversified sectoral buys,” said Jamil Naayem, principal economist for Mena at S&P Global Market Intelligence.

“Although investments in large advanced economies and prominent emerging markets are likely to continue in the next few years, GCC SWFs will also recycle part of the petrodollar inflows in peer Middle East and North African economies in need of external financing. Egypt and Turkey are a case in point.”

Gulf sovereign wealth funds are expected to become more active and play an even bigger role in global markets this year as they receive large capital injections derived from higher oil revenue, an annual industry report by Global SWF said in January.

Of the top 10 most active sovereign investors in 2022, five were from the Gulf region, according to the industry specialist.

Singapore's GIC led the top 10 list of state-owned investors, with $40.3 billion invested in 2022, 17 per cent more than in 2021. It was followed by the Abu Dhabi Investment Authority and Saudi Arabia's Public Investment Fund.

SWFs of the region are utilising part of the additional fund inflows to make strategic buys in advanced economies, mostly in the US and Europe (including the UK), the S&P data showed.

“GCC SWFs appear to have become go-to investors in difficult times. GCC state-owned investors, including SWFs and public pension funds, deployed around $83 billion of fresh capital during 2022,” the report said.

“The region’s SWFs are currently striving to further expand their global footprint by investing in various geographies and sectors.

“Notably, India and China – and other Asian countries – are on their radars. Green investments and net-zero carbon emission targets have also been in their line of sight; several have invested in renewables lately.”

S&P Global Market Intelligence projects that the GCC's current account surplus will be at 9 per cent of the region's gross domestic product in 2023 and 6 per cent of GDP next year.

The aggregated 2022 current account balance of GCC countries surged to a 10-year high of $369 billion, or 16.9 per cent of GDP, the research showed.

This means that funds will continue flowing into “deep-pocketed SWFs”, providing additional investment opportunities domestically and abroad, the agency said.

GCC SWFs play a pivotal role in creating domestic employment opportunities and fuelling growth, and in managing the transition to economies no longer reliant of gas and fuel, it added.

Meanwhile, Saudi Arabia’s Public Investment Fund said that its assets under management grew 13 per cent to about $600 billion last year, from 2021.

The SWF established 25 companies last year and created 181,000 jobs.

It also made international investments worth $136.5 billion, with a growing focus on growing its domestic assets.